Correlation Between Medical Facilities and Falcon Energy

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Can any of the company-specific risk be diversified away by investing in both Medical Facilities and Falcon Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Medical Facilities and Falcon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Medical Facilities and Falcon Energy Materials, you can compare the effects of market volatilities on Medical Facilities and Falcon Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Medical Facilities with a short position of Falcon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medical Facilities and Falcon Energy.

Diversification Opportunities for Medical Facilities and Falcon Energy

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Medical and Falcon is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Medical Facilities and Falcon Energy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Energy Materials and Medical Facilities is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Medical Facilities are associated (or correlated) with Falcon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Energy Materials has no effect on the direction of Medical Facilities i.e., Medical Facilities and Falcon Energy go up and down completely randomly.

Pair Corralation between Medical Facilities and Falcon Energy

Assuming the 90 days horizon Medical Facilities is expected to generate 0.37 times more return on investment than Falcon Energy. However, Medical Facilities is 2.7 times less risky than Falcon Energy. It trades about 0.2 of its potential returns per unit of risk. Falcon Energy Materials is currently generating about 0.07 per unit of risk. If you would invest  1,328  in Medical Facilities on September 6, 2024 and sell it today you would earn a total of  277.00  from holding Medical Facilities or generate 20.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Medical Facilities  vs.  Falcon Energy Materials

 Performance 
       Timeline  
Medical Facilities 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Medical Facilities are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Medical Facilities displayed solid returns over the last few months and may actually be approaching a breakup point.
Falcon Energy Materials 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Falcon Energy Materials are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Falcon Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Medical Facilities and Falcon Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Medical Facilities and Falcon Energy

The main advantage of trading using opposite Medical Facilities and Falcon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medical Facilities position performs unexpectedly, Falcon Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Falcon Energy will offset losses from the drop in Falcon Energy's long position.
The idea behind Medical Facilities and Falcon Energy Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center.
Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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